Hari Prasad Kalakonda and Latha Kalakonda v. Aspri Investments, LLC
04-15-00114-CV
| Tex. App. | Dec 9, 2015Background
- In 2008 Shubha, LLC (owned by Hari and Latha Kalakonda) executed a lease-assumption and a personal guaranty referencing binding arbitration under the FAA with W. Jerry Hoover named as arbitrator.
- Aspri Investments later filed an arbitration claim (Feb 2014) alleging Shubha and the Kalakondas breached the lease/guaranty; Kalakondas filed counterclaims and a supplemental counterpetition shortly before the hearing.
- Hoover struck the Kalakondas’ first supplemental counterpetition (filed 13 days before final evidentiary hearing) and precluded evidence on those new claims.
- Final evidentiary hearings occurred July 24–26, 2014 (no court reporter). On October 10, 2014 Hoover awarded Aspri $66,235.51 (including attorney’s fees); Shubha and the Kalakondas recovered nothing.
- Aspri petitioned to confirm the award in state court; the trial court confirmed the award and entered judgment for $66,235.15 against Shubha and the Kalakondas. The Kalakondas appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Arbitrator refused to hear pertinent evidence (9 U.S.C. §10(a)(3)) | Kalakondas: Hoover improperly struck supplemental counterpetition and excluded evidence of those claims. | Aspri: Supplemental pleading was untimely and arbitrator properly policing the proceeding; each party had adequate opportunity to present evidence. | Court: No vacatur; arbitrator did not abuse discretion in striking late pleading and each party had full/fair opportunity. |
| 2) Evident partiality (9 U.S.C. §10(a)(2)) | Kalakondas: Hoover’s prior mediations/arbitrations involving Aspri’s counsel, naming in lease, venue in Houston, and lease interpretation show bias. | Aspri: Disclosures were known and not objected to; no undisclosed conflict shown; interpretation errors not basis for vacatur. | Court: Waiver of objections made during arbitration; no undisclosed conflict shown; legal error alone is not evident partiality. |
| 3) Arbitrator exceeded powers by holding Kalakondas individually liable (9 U.S.C. §10(a)(4)) | Kalakondas: They were not parties to lease so arbitrator exceeded authority finding personal liability. | Aspri: Kalakondas signed a Personal Guaranty expressly subject to binding arbitration and the same arbitration clause. | Court: No excess of power; guaranty authorized arbitration and personal liability finding. |
| 4a) Aspri violated the arbitration award before confirmation | Kalakondas: Aspri breached/violated award pre-judgment, warranting vacatur. | Aspri: FAA governs; section 10 lists exclusive vacatur grounds and pre-confirmation violation is not one. | Court: No vacatur; failure to identify an FAA §10 ground defeats this claim. |
| 4b) Trial court improperly interpreted the arbitration award | Kalakondas: Trial court interpreted/expanded the award instead of remanding ambiguities to arbitrator. | Aspri: Trial court’s judgment mirrored the award’s terms (amount, deadline, interest). | Court: No improper interpretation—the judgment adopted the award’s provisions. |
Key Cases Cited
- Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (Sup. Ct.) (arbitration awards generally upheld; legal error alone does not permit vacatur)
- Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (U.S.) (statutory FAA vacatur grounds are exclusive; "manifest disregard" is not an independent ground)
- Tenaska Energy, Inc. v. Ponderosa Pine Energy, LLC, 437 S.W.3d 518 (Tex.) (evident partiality requires nondisclosure of facts creating reasonable impression of bias)
- Mariner Fin. Group, Inc. v. Bossley, 79 S.W.3d 30 (Tex.) (arbitrator’s lack of knowledge of an alleged conflict precludes a charge of partiality based on that conflict)
- SSP Holdings Ltd. P’ship v. Lopez, 432 S.W.3d 487 (Tex. App.—San Antonio) (party seeking vacatur bears burden; review is narrowly deferential to arbitration awards)
- BNSF R. Co. v. Alstom Transp., Inc., 777 F.3d 785 (5th Cir.) (errors in contract interpretation by arbitrator are not grounds for vacatur)
- Brown v. Witco Corp., 340 F.3d 209 (5th Cir.) (court must remand ambiguities in an award to arbitrator, but confirmation is proper where judgment merely adopts award)
- Kosty v. South Shore Harbour Cmty. Ass’n, Inc., 226 S.W.3d 459 (Tex. App.—Houston) (arbitrator need not admit all evidence so long as parties had adequate opportunity to present case)